Watch Out: Barbarians At The Gate For CBOE Holdings (CBOE)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified CBOE Holdings ( CBOE) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified CBOE Holdings as such a stock due to the following factors:

  • CBOE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.5 million.
  • CBOE has traded 311,074 shares today.
  • CBOE traded in a range 241.4% of the normal price range with a price range of $1.89.
  • CBOE traded above its daily resistance level (quality: 30 days, meaning that the stock is crossing a resistance level set by the last 30 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on CBOE:

CBOE Holdings, Inc., through its subsidiaries, operates as an options exchange and creator of listed options in the United States. The stock currently has a dividend yield of 1.4%. CBOE has a PE ratio of 27. Currently there are 2 analysts that rate CBOE Holdings a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for CBOE Holdings has been 631,600 shares per day over the past 30 days. CBOE has a market cap of $4.9 billion and is part of the financial sector and financial services industry. The stock has a beta of 0.74 and a short float of 3.3% with 5.37 days to cover. Shares are down 8.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates CBOE Holdings as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • CBOE has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.82, which clearly demonstrates the ability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Financial Services industry and the overall market, CBOE HOLDINGS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for CBOE HOLDINGS INC is rather high; currently it is at 55.98%. Regardless of CBOE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CBOE's net profit margin of 29.58% significantly outperformed against the industry.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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